Two ugly weeks in the grain markets

Last week I referenced Shakespeare’s quote about “now is the winter of our discontent.” It remains to be seen how the whole winter is, but the last few weeks have been ugly.

Corn and soybean markets used the USDA reports that were out Jan. 12 as an excuse to crash markets. The soybeans, that were already declining going into the reports, accelerated the decline. The result is sharply lower prices in all three commodities, unhappy farmers, and a phone in my office that doesn’t ring much.

Ugly market

It is hard to get excited about selling me grain when corn has dropped 60 cents, beans are off $1.40 since Jan. 4, and wheat is down almost 90 cents.

It is difficult to be excited about talking to farmers on the phone when they want to know what to do and I don’t have an opinion. Maybe that is an exaggeration.

Opinion

I can usually come up with an opinion, I just don’t have a strong one. I notice that the cheaper grain gets, the more I say I can see an excuse to wait to sell. Maybe we can get a bounce. By definition, that means I am resorting to the same kind of wishful thinking that is keeping the producer from selling–if the price was so much higher recently, there must be some kind of bounce.

There are two problems with this.

First, the farmer wants me to encourage him to do nothing. If I agree with him, I must be right. He does not want to sell at these prices, and I am giving him an excuse. If I encourage him to sell and the prices do bounce, he will think I am taking advantage of him.

Second, the charts do not encourage the idea that there will be a bounce. They make the market look like it could go a lot lower before it finds support.

March futures

Look at the March corn futures. We left a report gap. That is, after we trading down the daily limit of 30 cents, the next morning’s open was lower than the previous close. We left a hole of 3 cents between the close and the next day’s high, near the open. On one hand, this gap is a technical objective. That is, we almost always go back and close and corn chart gaps. Of course, there is no telling how soon that would happen. And, there is another matter–where is the downside support?

The same March corn futures chart shows the next chart low clear down at 3.40-3/4, down another 24 cents in round numbers. It is conceivable, even likely, that we will test that low. The next lows are at 3.23-1/2 and 3.15-1/2.

Low

Now, that is ugly! In reality, there is nothing to keep us from going that low if we do not inspire some confidence. The March soybean chart is another problem. The recent low is the overnight Monday/Tuesday at 9.33-1/4. There is not any support showing on the chart until we get to the last low of 8.88-1/4 that was made back in early October, the harvest low. We have already blown past the old early November low of 9.55-3/4. So, we might get back to harvest lows.

Any good news?

Is there any good news? Well, the cheaper we get, the more excitement we can generate with less news. Any fundamental news that is bullish has more punch when prices are low. What news can there be? Better exports and usage with cheaper grain is one. Then, we are not too far away from the March 31 USDA Planting Intentions Report to think about what prices might do to acreage intentions and what acreage might do to price.

Then, there is the normal ebb and flow of the market. It is not entirely wishful thinking to hope that traders look at cheap prices and decide they are too cheap.

At some level traders will want to bet on higher prices. I just hope they don’t wait for those old harvest lows to get some nerve.